Assuming the economy is “trying” to reach equilibrium, this suggests that it “wants” less workers.

If that is a secular trend, as suggested by the steadily lengthening jobless recessions since the 80s,

…we’re faced with the need for a new structure wherein people’s claims to a decent share of the pie are not linked to their ability (luck) in finding well-compensated employment. Alternative means are necessary to provide widespread prosperity and the widespread demand that gives producers the incentive to expand and innovate.

Comments (34)

run75441

February 25, 2012 11:24 am

Steve:

I would argue we never returned to the level of Participation Rate experienced in the Fall of 2001 and immediately after the declared end of the 2001 ewcession which was not the high experienced beteen 1997 and 2000.. Others have commented on how it has been on the decline for much longer. I would say the trend has been much steeper sine 2001 and not as a result of babyboomers leaving the work force which really did not start till much later in the last decade.

Anna Lee

February 25, 2012 12:10 pm

Has anyone stopped to think how tragically silly this all is. Money, commerce, capitalism etc. is just a mechanism for exchanging goods. The important goods are related to surviving. So people work to feed and shelter their families. Now commerce ought to, at the minimum, feed and shelter all the humans or else what value does it really add???? It appears if commerce needs less labor then people should work less hours each but share the productivity increases proportionately.

Am I the only one that sees this humanity part of it all? Am I the only one that finds some people’s unneeded wealth to be quite silly when a human somewhere actually needs some of it?

rjs

February 25, 2012 12:17 pm

i dont know what you want to call it, or how you’d want to change it, but an economic, financial & political system that idles nearly one-fifth of its productive citizens & has another fifth working below their capacity is a failure..

jazzbumpa

February 25, 2012 1:08 pm

Longer duration of unemployment.U6 remaining tragically highGDP growth declining for over 4 decades.Secular disinflation over that same period

All the while, reduced tax rates and regulations.The slow death of unionsRepublican attacks on education.Record wealth and income disparity.Finance sector capturing an increasing slice of the pie.

Neoliberalism has been a smashing success.

WASF!JzB

coberly

February 25, 2012 1:43 pm

jazz

except for “decining growth for over 4 decades” which i would take to be a sign that we can only “eat” so much before we need to push back from the table and think about other things we might want to do with our lives besides “consume”

i would agree with several people that i am currently reading… on the right (former asst treasury secretary under Reagan) and the left (Greider)

what we are looking at is the result of “globalization” (exporting jobs is not “free trade”) and the capture of the financial system and government by criminals… made possible by “deregulation.”

oh, and “cut taxes” as the cure for everything.

coberly

February 25, 2012 2:53 pm

Anna

you are not the only one.

but the people who have the most money make the rules. they also pay the “economists” to tell us that the rules are the only possible way to run an economy. there are some voices who disagree with them… but you won’t hear them on TV.

Daniel Becker

February 25, 2012 5:43 pm

Nice to see the mainstreem econs finally getting a clue. In 2008 I posted on this issue looking at what I called Person/weeks unemployed. What lead me to that post was a concern that to the unemployed, the date of a recession ending is the date they got a job.

The issue is not just that unemployment is getting longer, it is that the number of people unemployed multiplied by the number of weeks unemployed has been peaking further and further away from the time a recession is called over. For 2001 it was 20 months post recession. http://www.angrybearblog.com/2008/04/longest-recession-ever.html

The other issue is the product of unemployed times weeks has been producing an ever greater number. Interesting enough, as of the 2001 recession, Reagan still was the all time winner. Person Weeks Unemployed hit 225,000 30 months after the end of his first recession.

jazzbumpa

February 25, 2012 10:13 pm

Dale -

By your analogy, what used to be the middle class has less to eat, and the poor have a lot less to eat.

Sure, there is more to life than consuming. These are the things that economics does not and cannot measure. But having a threshold level of wealth and income is an enabler for those other things.

Globalization is part of the picture, but there is a whole lot that is wrong right here at home that plays into it as well.

JzB

coberly

February 25, 2012 10:50 pm

jazz

and what is wrong hear at home is that american corporations have taken the jobs overseas. and american criminals have taken over the financial industry and the government.

there are limits to growth. it may be that the poor in this country… and i don’t mean those who make 100k… don’t have “enough.” but the rest of us are getting pretty close to stuffed. and the rich are of course obscene.

you are not talking about a decline in GDP, you are talking about a lower rate of growth. that is normal. hell, even cancers slow down when they exhaust their resource base.

coberly

February 25, 2012 10:51 pm

and the reason “economics” does not measure it is because economics is not a science but a religion founded on the principle that unlimited consumption is not only possible but necessary.

coberly

February 25, 2012 10:52 pm

jazz

and what is wrong here at home is that american corporations have taken the jobs overseas. and american criminals have taken over the financial industry and the government.

there are limits to growth. it may be that the poor in this country… and i don’t mean those who make 100k… don’t have “enough.” but the rest of us are getting pretty close to stuffed. and the rich are of course obscene.

you are not talking about a decline in GDP, you are talking about a lower rate of growth. that is normal. hell, even cancers slow down when they exhaust their resource base.

Troy

February 26, 2012 4:47 am

but you won’t hear them on TV.

because they own that too.

Troy

February 26, 2012 4:53 am

My thesis on this goes into thinking about where the money is actually going in our economy.

One thing that struck me is that economics is just to damn abstract, like trying to model weather systems without using spatial maps to organize the data into patterns.

Money in the economy flows like air, and since 1999 we’ve been losing a lot of money outflow to China and OPEC:

is a Q&D chart of the goods trade deficit with OPEC and China. Trade in services and the Triffin Dilemma make this not entirely accurate, but it’s good enough to see the problem — there’s a $600B hole in our economy.

We patched that hole 2002-2007 with the pleasant monetary redistribution of ~$6T via the housing boom/bubble, but that playtime is over now.

We should not curse the darkness; we should light candles. What aspects of the problem are natural to the way the world functions? What parts are remediable? What are the likely side (unintended bad) effects of the remedies?

My basic take is that the world has grown more competitive. People in Asia etc. are competing with people in the U.S. and Europe. People in Asia make less money than people in the U.S. and Europe, so they get the jobs, to the extent that they are portable and can be done with the level of education available. That is bad for the Americans and Europeans who get left behind but it is good for the Asians who gradualy are making more money–and, incidentally, spending much of it on their childrens’ education so they will be able to compete even better.

Some of that Asian prosperity is available to come back to the U.S. and Europe in the form of trade in the future. But are Americans and Europeans spending wisely on educating their children–I mean spending time and effort as well as money? Evidence suggests that well-off Americans who had good educations themselves understand this quite well and are doing a good job at it. Many other Americans do not get it–both on the left and the right. Intergenerational effort seems to be low by historical (last 100 years in America) standards except among the top 10-20% economically.

As a consequence, unemployment will continue to increase secularly and income inequality will continue to increase securlarly. Not good.

The only good answer is education–make the next generation better able to compete globally than the last.

As for the safety net: As we all should know, the safety net is a two-edged sword. We need to construct it very carefully so no one starves but so that few people are attracted to simply living off it.

coberly

February 26, 2012 10:06 am

Tim

yeah, sure has nothing to do with shipping jobs overseas.

coberly

February 26, 2012 10:12 am

martin

no one who has half a chance at a decent job is “attracted to simply living off it.” there are people besides me… at least one of them a former asst treasury secretary to Reagan… who think “education” is a chimera as long as jobs are shipped overseas. you might be interested in a book “How the Economy Was Lost” by Paul Craig Roberts. I could cite half a dozen others, but they tend to be by the usual suspects and less likely to be convincing.

I am sorry but “education” is part of the Sunday Supplement fairy tale spun by those who want the people to blame themselves for their inabiity to get ahead.

coberly

February 26, 2012 10:14 am

Troy

it’s not the money. it’s the jobs.

Tim Worstall

February 26, 2012 11:38 am

It could also be to do with that, sure. But note that “also”.

Historically the US short term jobless rate has been similar to that of most European countries. The long term US jobless rate has been rather lower than that of most European countries.

It is also true that unemployment benefits are time limited in the US, in normal times to 26 weeks, and they are normally not time limited in Europe.

It’s not quite necessary to be an economic genius to see that tyhere might be a link between these various facts.

And when you start to see long trm US unemployment climb to European levels at about the same time that US unemployment pay extends its time limits…well, it is extra data supporting the idea that there might be sme sort of connection between length of unemployment and length of unemployment benefits really.

run75441

February 26, 2012 12:34 pm

Martin:

It is not as simple as you make it out to be:

Education: If parents could “afford” to send their children to college; certainly, this would be an argument of the choices people make in educating their children. For example; in the horse and buggy days, my own Masters was roughly $350 per course + books or $1400 per year. Fast forward to today and you are looking at a total of $82,000 + books for the same 18 courses of work I went through. This is on top of a BA from a good school which can be ~$50,000 at a state school or ~$100,000 at a private school. Pell Grants have not kept up with this increase nor has school loans. We have also seen increases in the interest rates charged parents and students on loans used to finance education (these rates should have never exceeded 3%). What is apparent is an increased burden upon those coming out of college which negates much of their ability to take their place as consumer due to loan interest rates.

Jobs: While a BA in hand has kept the rate of unemployment low for many people who possess it; certainly, it is not the ticket it once was and as the level of education increases offshore the competition for those jobs will increase also. This does not touch upon the increases in intelligent technology which Martin Ford discusses in his book the “Lights in the Tunnel.” The levels of the Non-Institutional Civilian Population participating in the Civilian Labor Force have been decreasing quite readily over the years by age, gender, and level of population participating in the Civilian Labor Force. I believe as Dr. Elizabeth Warren adequately detailed and also Spencer here at Angry Bear, what took one income in the eighties now takes two incomes regardless of the educational level as more of the productivity gains are skewed heavily towards Capital and away from Labor. Costs have increased and Wages have been mostly stagnant or decreased and not keeping up with the increases. The same as having a good work ethic and a high school diploma as being the ticket to the middle class, the glory days of the BA have diminished.

Policies and Legal Rulings: An easily forgettable SCOTUS ruling occurred in 1978, Marquette vs. First Omaha Services. Brennan wrote the majority opinion and effectively it overruled all state usury laws opening the door for national banks to charge whatever interest rate they wish regardless of where the banks were chartered. As we all know, Delaware and South Dakota are the two premier states for chartering as they have liberal banking charter laws. It has been said Brennan and other friendly justices expected Congress to react to this ruling and change the law (National Bank Act). As usual, Congress didn’t and neither did the President push.

Senator Byron Dorgan of North Dakota passionately spoke about the dangers of ratifying the Financial Services. Calling it “no fault capitalism” and labeling the banks involved as “to big to fail,” he went on to say:

Ignoring the Cassandras of our time such as Senator Dorgan and CFTC Chairman Brooksley Born; Congress went on to pass the Senator Phil (Wendy) Gramm sponsored and Greenspan and Summers backed Financial Services Modernization Act of 1999. Even today, we still engage in nefarious high profit and gambling activities on Wall Street by banks and speculators. Why the hell would anyone one wish to invest in low return manufacturing when so much can be made by no fault gambling on Wall Street and the gov will pick you up if you fail? Change the paradigm if you wish to get more people back to work. Make it more profitable to invest in Labor than in Gambling on Wall Street.

run75441

February 26, 2012 12:43 pm

Ignoring the Cassandras of our time such as Senator Dorgan and CFTC Chairman Brooksley Born; Congress went on to pass the Senator Phil (Wendy) Gramm sponsored and Greenspan and Summers backed Financial Services Modernization Act of 1999. Even today, we still engage in nefarious high profit and gambling activities on Wall Street by banks and speculators. Why the hell would anyone one wish to invest in low return manufacturing when so much can be made by no fault gambling on Wall Street and the gov will pick you up if you fail? Change the paradigm if you wish to get more people back to work. Make it more profitable to invest in Labor than in Gambling on Wall Street.

run75441

February 26, 2012 12:48 pm

Globally: There is little difference in the direct labor cost input to manufacturing a product. Be it one segment of the process or the total rollup of costs, the percentage remains pretty much the same as most manufacturing (Gettelfinger pointed this out correctly in front of Congress) people will point out. While a convenient scapegoat, Labor is not the prime factor for companies relocating offshore to manufacture. Look to other costs which are related to the infrastructure and the cost to operate besides market growth. In any case, rather than just arbitrarily sign NAFTA, CAFTA and other agreements; some countries (Canada, etc) have seen fit to protect certain industries from these agreements by writing exceptions into them. The US did not see fit to do so.

run75441

February 26, 2012 12:49 pm

Generational Mobility: It is easier for many to slip backwards than it is to move upwards on the ladder of success and yes education is a factor in this. If the costs of education increase beyond the ability to acquire it, then this becomes a bigger factor. Without getting into more than just this; Tom Hertz “Upward Mobility in America”2006 does a sound effort in detailing this and other preventive factors which existed before the big crash of Wall Street and TBTF in 2008. It has not gotten any easier. Sorry for the multiples, JS Kit is being a ????? today.

run75441

February 26, 2012 12:51 pm

Tim:

and not the availabilty of jobs? Come on, who are you kidding????

coberly

February 26, 2012 1:40 pm

not necessary to be an economic genius.

that’s for sure.

forget cause and effect. we got stats.

coberly

February 26, 2012 1:42 pm

not an economic genius.

that’s for sure.

who cares about cause and effect? we got stats.

Tim,

in all kindness your “reasoning” is proof that self interest destroys brain cells.

coberly

February 26, 2012 1:47 pm

run

mostly agree. but as a quondam educator, i need to say the only reason a BA is “valued” today is because some employers require it. there is NO evidence that BA’s confer useful skills or even represent useful intelligence.

i am fairly sure the PhD market is much the same.

Tim Worstall

February 26, 2012 2:08 pm

Are you seriously proposing that the extension of benefits has no effect at all on the long term unemployment rate?

That’s a paper by my old professor. He’s certainly of the left. Ias now a Labour Peer. I’d put him about with Dean Baker on the left right spectrum.

Please note, I sdo not say that unemployment has not increased as partially the reduction of ther number of jobs. And I certainly don’t say that the increase in long term unemployment is solely to do with the time extension on benefits. I am only saying that it’s uinfluenced by it. Not sole cause, but contributory.

run75441

February 26, 2012 3:07 pm

Tim:

Yes, I am seriously proposing Tim, that your premise is not as determining as what you would have us believe. If anything, the lack of jobs matching the skill sets, past job attributes, and needs of the applicants has a much greater impact on the length of unemployment. A little can be attributed to applicants being selective also.

The couner argument might be the numbers of people employed when suitable jobs were plentiful between 1997 and 2000. More boats floated during this time period which was a temporary suspension of the natural employment rules for once. When suitable jobs are plentiful, more people seek to work rather than be on unemployment or disability as it does not make sense to them to be on unemployment or disability becuase of the stigma attached to either. It is the lack of suitable jobs.

Tim, you did not say this earlier:

“I do not say that unemployment has not increased as partially the reduction of ther number of jobs. And I certainly don’t say that the increase in long term unemployment is solely to do with the time extension on benefits. I am only saying that it’s uinfluenced by it. Not sole cause, but contributory.”So, I could only observe your position was the opposite.

I willl add this; all of the automotive union, blue collar, and white collar workers who took the automotive buyouts at whatever $ allowed were denied Unemployment Benefits during the length of it and after the amounts expired. This was a part of their buyout contracts in Michigan. In effect it kept Michigan U3 low and expanded the Michigan NILF after a period of time. If you are familar with the stat, you would know Michigan has been in a state of Recession for almost a decade with little federal help to alleviate it. Levin was silly enough to talk about the reduction of Michigan U3 in front of me.